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What You Need to Know About Long-Term Care Insurance

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You need a crystal ball to know for certain whether you'll have to tap long-term health care in your old age. But for many people, the specter of pricey long-term care bills, and the burden they might place on family, is enough to make them consider buying long-term care insurance. In recent years, substantial premium hikes have earned long-term care insurance a reputation for being unaffordable. Experts say that rate increases primarily impacted older policies that were based on flawed assumptions, and consumers buying long-term care insurance today likely won't experience the same volatility. In the interim, the market has shifted and changed, with fewer providers offering traditional long-term care coverage. Curious about what you should know about long-term care insurance? Here's what to understand.What Is Long-Term Care Insurance?Long-term care insurance offers coverage for certain expenses associated with chronic health conditions, including professional help eating, bathing, dressing and using the bathroom. "It's health insurance for things you won't recover from," says Evan Beach, certified financial planner with Campbell Wealth Management in Alexandria, Virginia. Policyholders typically pay premiums on a regular basis until they pass away or need to obtain care. If they tap long-term health care, the insurance company will dole out a daily or monthly benefit amount to pay for eligible services, such as hiring a home health aide, utilizing adult daycare services or entering a nursing home. "Here's the rationale for even thinking about it," says Jesse Slome, executive director for the American Association for Long-Term Care Insurance. "If you live a long life, chances are that at some point between now and when you die, you're going to need services that are categorized as long-term care. That's typically care in your own home, or it might be in a facility like a nursing home."People often look into purchasing long-term care insurance policies when they're in their 50s or early 60s and still relatively healthy. Typically, younger purchasers are more likely to qualify and can score lower rates. Why Should I Buy Long-Term Care Insurance?Long-term care insurance provides coverage for expenses associated with chronic conditions and not covered by Medicare. Those who choose to buy a long-term care insurance plan are often hoping to avoid burdening a spouse or child with the work and expense of at-home or inpatient care. They may be seeking to protect their assets or concerned that long-term care costs will pulverize their financial legacy. Experts note that discussing the potential value of long-term care insurance is especially important for women, who statistically live longer than men, potentially outliving a male spouse, and spend more time utilizing long-term health care services. It's important to note that long-term care insurance isn't the right choice for everyone. Beach says that it's a worthwhile consideration for consumers in the "doughnut hole" or "dangerous middle." Those are people who have too many assets to consider Medicaid for long-term health care needs, but not enough assets to pay for long-term care out of pocket. Other consumers may decide they're willing to bet on friends or family to take care of them physically or financially in old age. And some may choose to roll the dice, crossing their fingers that whatever illnesses they experience later in life won't be long-lasting or require extended care services. But for those who are worried about burdening a spouse or children and want to ensure that their assets aren't hoovered up by pricey long-term care costs, long-term care insurance is an option. How Do I Buy Long-Term Care Insurance?Here's where it's starting to get a little tricky. Fewer insurers offer traditional long-term care coverage these days, experts say. And you want to make sure you truly understand the policy fine print, including cost of living adjustments, elimination periods, application guidelines, shared care options and other details before you sign on the dotted line. Shoppers can look to purchase a policy through an insurance broker – Slome suggests choosing one who's knowledgeable about the long-term care insurance market – or via an individual insurance company. Experts note that there are fewer insurance companies selling long-term care insurance products now than there were a decade ago. Some major companies selling long-term care insurance products include Genworth, Northwestern Mutual and New York Life. Your employer may also offer long-term care insurance, which is underwritten on a group basis, as an employee benefit. It can be slightly less costly than individual coverage to the employee and may extend to other family members. The process for applying and being approved for long-term care insurance will vary depending on the type of policy. But for traditional long-term care policies, "you can't tap it unless a doctor gives the OK," says Les Masterson, managing editor for Insurance.com, Insure.com and CarInsurance.com. Applicants for a traditional policy should be prepared to undergo a health screening, including a physical exam, blood, urine and memory tests, Beach says. If you're already experiencing problems bathing, walking, performing daily errands or are battling certain chronic health conditions, chances are good you won't be approved and will find it difficult to get the green light in the future. "If you apply and get declined, it goes into a database and you have to disclose it," Beach says. Another option is to shop hybrid long-term care policies. It's increasingly common to see insurers package a long-term care rider with a permanent life insurance plan, which allows you to use the death benefit for long-term care needs. Or it may be packaged as a long-term care annuity. The function and approval process for these types of hybrid products is different than for traditional long-term care insurance, so make sure you research the differences. What Strategies Can I Use to Reduce My Long-Term Care Insurance Premiums?Long-term care insurance has a reputation for being expensive, and it's deserved. According to data provided by the American Association for Long-Term Care Insurance, a single woman at age 55 could pay $2,700 as a 2019 annual premium for a pool of benefits initially worth $164,000. Over the long haul, she could pay five figures' worth of premiums for a policy she may never need to tap.It's a gamble that makes some people nervous. If the price itself has you turned off, know that there are strategies for reducing the cost of long-term care insurance. Consumers should shop around and compare prices from several different insurers to get the best deal. They should also start discussing the potential need for long-term care insurance while they're relatively young. Applying when you're healthy can reduce your premiums. Consider reducing your benefit, including daily limits, lifetime benefits and cost of living adjustments, to receive less expensive coverage. Don't forget that you may have access to a pension, home equity and other assets that can help cover the cost of long-term care, so you don't necessarily need the plan to cover 100% of expenses. "I will go to my grave saying some coverage is better than none," Slome says..

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